8/9/2019 Intro to Life Insurance
1/285
LIFE INSURANCE
8/9/2019 Intro to Life Insurance
2/285
MODULE : IINTRODUCTION TO LIFE INSURANCE
8/9/2019 Intro to Life Insurance
3/285
Life Insurance
A contract in which the insurer in
consideration of a certain premiumagrees to pay to the assured or to theperson for whose benefits the policyis taken, a stated sum of money on
the happening of the particularinsured event
8/9/2019 Intro to Life Insurance
4/285
History of Life Insurance
o Life insurance had its origins in
ancient Romeo where citizens formed burial clubs
o that would meet the funeral expenses
of its memberso and help survivors by making some
payments
8/9/2019 Intro to Life Insurance
5/285
o In India, in the year 1818 the Oriental
Life Insurance Company was started atKolkata.
o In 1938, the Insurance Act was
passed, that looked into investments,expenditure and management of thecompanies' funds
8/9/2019 Intro to Life Insurance
6/285
o In 1956, the LIC of India was formedunder the LIC Act,1956
o In 1999, the Insurance Regulatory andDevelopment Authority popularlyknown as IRDA was created by an act
of the Parliament to regulate allinsurance companies and businesses inIndia
8/9/2019 Intro to Life Insurance
7/285
o IRDA has evolved into an effective
regulator and it has facilitated the entry
and growth of private players in theinsurance sector
o Since then the growth of the insuranceindustry in India has never been thesame again.
8/9/2019 Intro to Life Insurance
8/285
o Many major international players areoperating in collaboration with Indianpartners. The Joint Ventures arebacked by strong capital base andlatest technology
o The sector was opened up for privateplayers in the year 2000
8/9/2019 Intro to Life Insurance
9/285
Insurance Legislation The Insurance Act 1938:
o Principal enactment relating to insurance
o Contains provisions regarding;
Licensing of agents & their remuneration
Protection of policyholders interests Use of funds & patterns of investments
Constitution of Insurance Associations
8/9/2019 Intro to Life Insurance
10/285
8/9/2019 Intro to Life Insurance
11/285
Life Insurance Act, 1956
o Basis for the establishment of LIC asa corporate body
o Members of LIC are appointed byCentral Govt
o The no cannot exceed 16
o One of them is appointed asChairman
8/9/2019 Intro to Life Insurance
12/285
8/9/2019 Intro to Life Insurance
13/285
o The 4 Companies (The National Ins. Co. Ltd, TheNew India Assurance Co Ltd., The Oriental Ins. Co.Ltd., and The United India Ins. Co. Ltd.) were giventhe exclusive privilege of carrying on Gen. Ins.
Business in India
o This privilege was removed by the amendment madein the IRDA Act of 1999
o Subsequent to the changes in 1999, the above 4
companies became independent companies
o GICs role has become that of a National Reinsurer
8/9/2019 Intro to Life Insurance
14/285
Insurance Regulatory and DevelopmentAuthority (IRDA) Act 1999
Passed in Dec 1999
Provided for the establishment of IRDA
To protect the interests of policy holders
Aimed at opening up the ins. sector for Pvt.companies with a foreign equity of 26%
Also aimed at ending the monopoly of LIC &GIC
in the ins. Sector
Amended the Ins Act 1938, the LIC Act 1956 &The Gen. Ins. Business Nationalisation Act 1973
8/9/2019 Intro to Life Insurance
15/285
o Constitution of IRDA
A Corporate body
Not more than 10 members (Chairperson+ 9 other members)
Advised by an Insurance Advisorycommittee, of not more than 25 members
8/9/2019 Intro to Life Insurance
16/285
o Duties & Powers of IRDA Replaces the Controller of Insurance to
administer the provisions of the Ins. Act,like registration, licensing, laying down
regulations
To regulate, promote & ensure orderlygrowth of Ins. Business
To exercise all powers and functions ofthe controller of insurance
8/9/2019 Intro to Life Insurance
17/285
To protect the policy holders interests
To promote & regulate professionalorganisations connected with ins.Business
To call for information from, undertakeinspections and conduct investigationsincl. audit of the insurers
8/9/2019 Intro to Life Insurance
18/285
To control & regulate the terms &conditions offered by the insurers
To prescribe the manner & form in whichthe accounts will be maintained by theinsurers
To regulate the investment of funds
To adjudicate disputes between insurersand intermediaries
8/9/2019 Intro to Life Insurance
19/285
Consumer Protection Act 1986(COPA)
Consumer can approach the variousforums prescribed under the Act for
redress, if he is not satisfied
Consumer dispute redressal forums areestablished in each district and in each
state
The COPA applies to ins. Business as well
8/9/2019 Intro to Life Insurance
20/285
Policy holders have the right to seekredress against unfair practices or
unsatisfactory services from theinsurers
Majority of disputes in insurance ariseout of repudiation and delays inclaims
8/9/2019 Intro to Life Insurance
21/285
Ombudsman
Appointed by the Governing body of Ins.Council
Function : To resolve the complaints inrespect to disputes between the insurersand policy holders in cost effective,efficient & impartial manner
8/9/2019 Intro to Life Insurance
22/285
The complaints to the Ombudsman mayrelate to;
Partial or Total repudiation of Claims
Any dispute regarding premium paid or
payable in terms of the policy
Any dispute on the legal construction of thepolicy relating to claims
Delay in settlement of claims
Non-issue of any insurance document tocustomers after receipt of premium
8/9/2019 Intro to Life Insurance
23/285
Ombudsman Counsel & mediator
Has to make decision on the basis of docssubmitted
The complainant & the insurer can makepersonal submissions
But lawyers are not permitted to arguethe case
8/9/2019 Intro to Life Insurance
24/285
8/9/2019 Intro to Life Insurance
25/285
Ombudsman should makerecommendation within one month
from the date of receipt of complaint
If the complainant accepts this
recommendation, the insurer has tocomply within 15 days and inform theOmbudsman accordingly
8/9/2019 Intro to Life Insurance
26/285
If the complainant does not accept theOmbudsman's recommendation, theOmbudsman shall pass an award inwriting stating the amount awarded
The award has to be passed within 3months
8/9/2019 Intro to Life Insurance
27/285
The complainant has to intimate hisacceptance of the award within one monthby a letter of acceptance to the insurer,
and the insurer has to comply within 15days and inform the Ombudsman
If the complainant does not intimate theacceptance, the award cannot beimplemented
8/9/2019 Intro to Life Insurance
28/285
The Arbitration & Conciliation Act 1996
Provide for the settlement of disputes thruArbitration
Arbitration is a recognized & valid processfor the resolution of disputes
Speedier than proceedings in a court oflaw
8/9/2019 Intro to Life Insurance
29/285
Disputes regarding admissibility of claim is not subject toarbitration
Differences with regard to the amount of the loss to bepaid can be referred to arbitration
The sole arbitrator may be agreed to by the parties inwriting
Otherwise, each party will appoint one arbitrator and thetwo arbitrators will appoint a third called the Umpire
Any disagreement between the 2 arbitrators shall bereferred to an umpire
8/9/2019 Intro to Life Insurance
30/285
Other Laws:
The WC Act 1923
The Employee State Ins. Act 1948
The Marine Ins. Act 1963
Motor Vehicles Act, 1988
The Public Liability Ins Act 1991
8/9/2019 Intro to Life Insurance
31/285
Lok Adalats:
The Motor vehicle Act provided for theconstitution ofMACT (Motor Accidents ClaimsTribunals) by the State Govts.
The objective was to ensure speedy settlement ofTP claims
To clear the backlog of claims in the MACTs, LokAdalats were formed
From the pending cases, claims upto certainlimits are submitted to the lok Adalats
The selection of cases is made by MACT inconsultation with the insurer
8/9/2019 Intro to Life Insurance
32/285
Essential Features of Life
Insuranceo Elements of a valid contract
o Insurable interest
o Utmost Good Faith
o Warranties
o Assignment & Nomination
o Cause is certain
o Premium
o Terms of Policy
o Return of Premium
8/9/2019 Intro to Life Insurance
33/285
Peculiar Nature of Life Ins.: Thecontracted event is bound to happen
Life insurance is a longtime contract
8/9/2019 Intro to Life Insurance
34/285
Important activities in a Life
Insurance Organisation
o Procuring applications or proposals
o Scrutinising & making decisions onthe proposals
o Issuing the policy documents,incorporating the terms & conditions
8/9/2019 Intro to Life Insurance
35/285
o Keeping track of the performance of theinsurance contract by either party, likepayment of premium or payment of benefits
o Attending to various requirements during theduration of contract
o Other supporting activities (like advertising,maintenance of accounts, management ofpersonnel, compliance with regulations andlaws)
8/9/2019 Intro to Life Insurance
36/285
Modern concepts of LifeInsurance
o Economic Concepts
o Actuarial Concepts
o Legal Concepts
8/9/2019 Intro to Life Insurance
37/285
o Economic Concept:
Based on the economic principle. I.e.,Spreading of risks
8/9/2019 Intro to Life Insurance
38/285
o Actuarial Concept:
Based on the actuarial ormathematical principle
I.e., How much should be paid.(Premium)
Premium should be proportional to therisk
This process of fixing premium is donethru the Actuarial principle
8/9/2019 Intro to Life Insurance
39/285
o Legal Concept:
Based on Legal Principles Restrict the members of the pool to
enjoy the benefits of insurance withoutviolating the laws
8/9/2019 Intro to Life Insurance
40/285
Module II
LIFE INSURANCE PRODUCTS
8/9/2019 Intro to Life Insurance
41/285
The 2 basic needs of all individuals are;
Risk Coverage
Savings for Future
Basic Elements of Life InsuranceProducts
8/9/2019 Intro to Life Insurance
42/285
Risk here means Death
The first basic need is to provide alump sum amount to the family in theevent of untimely death of the breadwinner
Here the amount is payable only if
the death of the insured occursduring the selected period
TERM INSURANCE
8/9/2019 Intro to Life Insurance
43/285
The second is accumulation ofsavings for a specific purpose.
Here the amount is payable only ifthe insured survives till the end of theselected period
PURE ENDOWMENT
8/9/2019 Intro to Life Insurance
44/285
These 2 concepts Basic elements ofevery Life Ins. Product
Basic Building Blocks in all LifeInsurance Product design
Life Ins. Products are developed bycombining these 2 elements in differentproportions, according to the needs ofindividuals
8/9/2019 Intro to Life Insurance
45/285
Types of Life Insurance Products
Conventional Plans
Unit Linked Plans Annuities & Pensions
Besides there are Group Insurance
Plans & other special plans
8/9/2019 Intro to Life Insurance
46/285
Conventional Plans:
Oldest types of plans available
Cater to customers with a low riskappetite
Steady and almost assured returnsover the long term
Premium to Sum Assured ratios are
fixed for each plan and age. Generally withdrawals are not
allowed before maturity
8/9/2019 Intro to Life Insurance
47/285
Conventional Plans-Types
Conventional Plans:
a) Participating Plans
a) Non Participating Plans
8/9/2019 Intro to Life Insurance
48/285
Conventional Plans - Types
a) Participating Plans:
Share of profits are distributed to thePolicy holders
Also called With Profit Policies
8/9/2019 Intro to Life Insurance
49/285
a) Participating Plans:
i. Endowment Plansii. Money Back Plans
iii. Whole life Plans
iv. Childrens Plans
v. Joint Life Plans
8/9/2019 Intro to Life Insurance
50/285
i. Endowment Plans:
Primarily Provides a living benefit
More of an investment Benefits are paid after the specified
period
The period for which the policy is taken
is called the Endowment Period
8/9/2019 Intro to Life Insurance
51/285
8/9/2019 Intro to Life Insurance
52/285
ii. Money Back Policies:
Part of the Sum Assured is paid tothe policy holder in the form ofsurvival benefits, at fixed intervals,before the maturity date
8/9/2019 Intro to Life Insurance
53/285
Risk cover on life continues for the
full Sum Assured
Bonus is also calculated on the fullSum Assured
8/9/2019 Intro to Life Insurance
54/285
If the policyholder survives till theend of the policy term, the survivalbenefits are deducted from thematurity value
Money Back Policies give Money in
hand + Insurance cover
8/9/2019 Intro to Life Insurance
55/285
Money back policies are normally fora fixed tenure, normally up to 25years or so
The policy holder pays a fixedpremium periodically during the
paying period
8/9/2019 Intro to Life Insurance
56/285
iii. Whole Life Policies
Cover extends to the whole life Premiums are paid till death
Premium rates are comparatively
lower
8/9/2019 Intro to Life Insurance
57/285
iv. Children's Plans
Insurance can be taken on the lives of
children, who are minors
The proposal will have to be made bya parent or guardian
Generally, in these plans risk on thelife of the insured child will begin onlywhen the child attains a specified age
8/9/2019 Intro to Life Insurance
58/285
iv. Joint Life Policies
Cover the risk of two or more lives
Under a single policy Usually cover Husband & Wife,Partners etc
SA becomes payable;
Either at maturity Or during the death of one of the
assureds
8/9/2019 Intro to Life Insurance
59/285
b) Non Participating Plans
i. Pure Endowment Plansii. Term Insurance Plans
8/9/2019 Intro to Life Insurance
60/285
b) Non Participating Plans
Not entitled to share the profits ofthe insurer
The policy holders get only the SumAssured, without any bonus
Also known as Without ProfitPolicies
8/9/2019 Intro to Life Insurance
61/285
Bonus Loading is not charged in
Non Participating policies
The amount of insurance to be paid iscertain in Non Participating policies
8/9/2019 Intro to Life Insurance
62/285
i. Pure Endowment Plans
To Pay the insurance money in theevent of the insured surviving till theend of the endowment term
Provides only Survival Benefits
8/9/2019 Intro to Life Insurance
63/285
Pays the face value of the policy onlyif the insured survives the period ofinsurance
In case of death of the insured duringthe period of insurance, nothing
becomes payable
8/9/2019 Intro to Life Insurance
64/285
Pure Endowment is for the benefit ofthe policy holder
Pure Endowment has the element ofinvestment
Pure Endowment grants protectionagainst living long
Pure Endowment provides old ageprotection
8/9/2019 Intro to Life Insurance
65/285
ii. Term Insurance Plans
A contract that furnishes lifeinsurance protection for a limited no.of years
8/9/2019 Intro to Life Insurance
66/285
The face value of the policy becomespayable only if death occurs duringthe stipulated term
In case of survival, nothing will bepaid
Provides only death cover
8/9/2019 Intro to Life Insurance
67/285
Advantage Low cost (since only
death is covered)
Suitable where risk coverage isneeded for a restricted period
8/9/2019 Intro to Life Insurance
68/285
Disadvantage The Insurance Moneyis payable only in case of death
If death occurs later, i.e. after theexpiry of the selected term, nothingbecomes payable, irrespective of how
long the original term might havebeen
8/9/2019 Intro to Life Insurance
69/285
Term Insurance Similar to theGeneral insurance Policies
Provides Risk cover only for the termselected
These plans are not very popular, asthere is no saving content
8/9/2019 Intro to Life Insurance
70/285
Term Insurance is for the benefit ofothers
Term Insurance has the element ofProtection
Term Insurance grants protectionagainst living too short
Term Insurance provides Familyprotection
8/9/2019 Intro to Life Insurance
71/285
Term Insurance Provides protectionagainst death during a specifiedperiod (Unlike Whole life policies,which provide protection againstdeath at any time)
8/9/2019 Intro to Life Insurance
72/285
ii. Term Insurance Plans - Types
Level Term Insurance Decreasing Term Insurance
Increasing Term Insurance
Renewable Term Insurance
Convertible Term Insurance
8/9/2019 Intro to Life Insurance
73/285
Level Term Insurance
Uniform premium & benefit through out
the term of the policy
In the event of death anytime during theterm, the SA is payable
Most popular amongst the TermInsurance plans, because of its simplicity
8/9/2019 Intro to Life Insurance
74/285
Decreasing Term Insurance
From an initial amount of insurance,the risk protection decreases yearafter year, becoming zero at the endof the period of insurance
Premium is constant, but the benefitdecreases
8/9/2019 Intro to Life Insurance
75/285
8/9/2019 Intro to Life Insurance
76/285
Increasing Term Insurance
Generally added as rider to another policy
contract
At the option of the insured, the SumAssured increases by fixed percentage orby fixed amount periodically under thecontract
This amount will be available as deathbenefit
8/9/2019 Intro to Life Insurance
77/285
Renewable Term Insurance
Have built in automatic renewal feature
At the end of the fixed period, thepolicy can be renewed automatically bythe policy owner
Without the necessity of medicalexamination / irrespective of the statusof his health
8/9/2019 Intro to Life Insurance
78/285
Premiums will be for a given period,based on the age at beginning of theperiod
At the time of each renewal, premiumwill be the at the rate applicable to the
age attained at the beginning of eachsuch renewal
8/9/2019 Intro to Life Insurance
79/285
Hence, the premium payable will be
increasing with each renewal
At advanced ages, the premium willbe very high
8/9/2019 Intro to Life Insurance
80/285
Convertible Term Insurance
Insured has the option to exchangehis term insurance policy for apermanent type of policy viz, Whole Lifeor Endowment, without having to
produce evidence for continuedinsurability
8/9/2019 Intro to Life Insurance
81/285
Such conversion is allowed during the
period of insurance, and effected forthe AttainedAge or OriginalAge
No further medical examination or
underwriting decisions, when theright of conversion is exercised
8/9/2019 Intro to Life Insurance
82/285
Conversion at the Attained Age:
Premium rate for the new policy will befor the age attained on the date ofconversion
8/9/2019 Intro to Life Insurance
83/285
If the method of Conversion is at the Original Age:
Conversion will take effect from the dateof commencement of the original terminsurance policy
Premium for the converted policy, isrelated to the age at the original date ofcommencement
8/9/2019 Intro to Life Insurance
84/285
Suitable for young people, in theearly stages of their careers
These policies are also useful forpeople who have low income todayand hence cannot afford to pay high
premium in the initial years
8/9/2019 Intro to Life Insurance
85/285
Unit Linked Plans
Combination of Life insuranceprotection + Investment
Offers the benefits of Life Insurance
Provides option to participate in the
growth of capital market
8/9/2019 Intro to Life Insurance
86/285
ULIPs : An endeavor of IRDA toenable the buyer to make the mostinformed decision possible whenplanning for financial security
8/9/2019 Intro to Life Insurance
87/285
ULIP - abbreviation for Unit LinkedInsurance Policy
The dynamics of the capital markethave a direct bearing on theperformance of the ULIPs.
8/9/2019 Intro to Life Insurance
88/285
IN ULIPS THE INVESTMENT RISK ISGENERALLY BORNE BY THEINVESTOR.
ULIPs contribute nearly 50% of thepremium for some insurers
8/9/2019 Intro to Life Insurance
89/285
Out of the Premium, amounts areadjusted towards
Cost of Insurance (Death Cover)
Adjustment towards charges
Allocated Premium Invested in a
fund chosen by the investor
8/9/2019 Intro to Life Insurance
90/285
In ULIPs,
Death Benefits Fixed
Maturity Benefits Not Guaranteed
Maturity Benefits:
Based on Market Conditions Fund in which premium has been
invested
8/9/2019 Intro to Life Insurance
91/285
ULIPs provide flexibility to the PolicyHolders
Option of switching
Policy Holders can make lump sumadditional contribution at any time
Top up the expression used to refer to thepolicyholder increasing the contribution forinvestment. There could be a top up charge
8/9/2019 Intro to Life Insurance
92/285
As per IRDA guidelines;
Top up is allowed only if the regularpremium is paid up to date
8/9/2019 Intro to Life Insurance
93/285
Policyholders may not pay thepremium in a year, subject to certainconditions
If that happens, no new units will be
added to this funds Some units will be reduced to pay for
the annual charges for cover, foradministration, for fund managementetc.
This is called Premium Holiday
8/9/2019 Intro to Life Insurance
94/285
Net Assets Value (NAV)
Represents the net value of the fundon a particular date
Reflects the total value of the assetsof that fund, after some adjustmentsfor expenses
8/9/2019 Intro to Life Insurance
95/285
Surrender Value:
Cash Value payable on voluntarytermination of the policy contract at
the desire of the policy holder, butbefore the expiry term
A policy can be surrendered, providedit is kept in force for atleast 3 years
Mode of calculating surrender valuediffers from company to company
8/9/2019 Intro to Life Insurance
96/285
Lock in Period:
Period during which withdrawals arenot allowed
It is 3 years, according to IRDAGuidelines
Surrender value will be allowed onlyafter 3 years
Diff b t ULIP &
8/9/2019 Intro to Life Insurance
97/285
Differences between ULIPs &Traditional Plans
ULIPS TRADITIONAL PLANS
The Premiums, in excess ofRisk Cover, is invested as
desired by the policy holder
Investment - InsurersDiscretion
Investment returns varybased on the marketmovements.
Investment Risk borne bythe policy holder
Guaranteed benefits Insurer bears the investmentRisk
Non Guaranteed benefits likebonuses based on theperformance of insurers
8/9/2019 Intro to Life Insurance
98/285
ULIPS TRADITIONAL PLANS
Withdrawals are allowed
Loss, if any, depends on NAV
Surrenders are allowed, butat a loss
No bonuses (there are fewexceptions)
Bonuses are payable inparticipating policies
Benefits are variable Benefits are pre determinedGains likely, depending onmarket movements
Gains unlikely, exceptthrough bonuses
8/9/2019 Intro to Life Insurance
99/285
Charges applicable in ULIPs
These charges are subject to various conditions& vary between insurers
Accident Benefit Charges : If the accidentrider is availed of
Administration or Fixed charges: Fees forthe administration of the plan
Flat Fee: charged every month, regardless ofthe size of the premium
8/9/2019 Intro to Life Insurance
100/285
Fund Administration Charges: Being apercentage of the fund & deducted daily
Fund Switching Charges : Levied whenthere is a switch from one fund to another
Insurance or Risk Cover Charges:Premium for the death cover
8/9/2019 Intro to Life Insurance
101/285
Service Tax
Surrender Charges: May be charged forpartial or full encashing of units before acertain period of time
8/9/2019 Intro to Life Insurance
102/285
Attractive Features of ULIPs
Flexibility
Flexibility to choose Sum Assured.
Flexibility to choose premium
amount.
Option to change level of Premiumeven after the plan has started (Topup facility).
Flexibility to change asset allocationby switching between funds.
8/9/2019 Intro to Life Insurance
103/285
Transparency
Changes in the plan & net amountinvested are known to the customer
Convenience of tracking ones
investment performance on a dailybasis.
8/9/2019 Intro to Life Insurance
104/285
Liquidity
Option to withdraw money after few
years
Low minimum tenure
Partial / Systematic withdrawalallowed
8/9/2019 Intro to Life Insurance
105/285
8/9/2019 Intro to Life Insurance
106/285
Module III
ANNUITIES & PENSIONSGROUP INSURANCE
SPECIAL PLANS
8/9/2019 Intro to Life Insurance
107/285
8/9/2019 Intro to Life Insurance
108/285
Annuities form of pension
Practically the same as Pensions
Provide periodical payments
8/9/2019 Intro to Life Insurance
109/285
8/9/2019 Intro to Life Insurance
110/285
Insurance Company makes a series ofperiodic payments to a person(annuitant)
Or to his dependants
Over a No of years (Term)
In return of the money paid to theInsurance Company
8/9/2019 Intro to Life Insurance
111/285
Annuities start where Life Insuranceends
Called the reverse of Life insurance
Annuity stops at death of a person
No part of the premium is returnableon death
Differences Annuities & Other Life
8/9/2019 Intro to Life Insurance
112/285
Differences Annuities & Other LifeInsurance Contracts
Annuity Contracts Other LifeInsurance Policies
Liquidates gradually
the accumulated funds
Provides gradual
accumulation of funds
Taken for ones ownbenefit
Generally for benefitsof dependants
The insurers paymentstops at death The insurers paymentis usually given atdeath
8/9/2019 Intro to Life Insurance
113/285
Annuity Contracts Other LifeInsurance Policies
Premium is calculatedon the basis oflongevity of theannuitant
Premium is based onthe mortality of thepolicy holder
Provides protectionagainst living long
Protection againstliving short
8/9/2019 Intro to Life Insurance
114/285
Conventional pension plans
In these, major portion of thepremium monies is invested in bondsand government securities
The returns are on the lower side
8/9/2019 Intro to Life Insurance
115/285
Unit Linked Pension Plans
Play an important role in the
retirement planning exercise
These Plans invest a portion of the
premium in the stock market apartfrom bonds and governmentsecurities
8/9/2019 Intro to Life Insurance
116/285
Immediate Annuity:
Provides income for a guaranteedperiod of time
Payments begin within one year of
purchase
8/9/2019 Intro to Life Insurance
117/285
Begins at once or immediately onexpiry of the designated period
Immediate annuity is purchasedwith a single premium calledPurchase Price
8/9/2019 Intro to Life Insurance
118/285
Deferred Annuity
Annuity payments to the annuitantcommence at some specified time orspecified age of the annuitant
This specified period is calledDeferment Period
8/9/2019 Intro to Life Insurance
119/285
8/9/2019 Intro to Life Insurance
120/285
8/9/2019 Intro to Life Insurance
121/285
During the life time of the annuitantor his spouse, whichever is longer(Joint Life Annuity)
8/9/2019 Intro to Life Insurance
122/285
For a fixed no of years like 5, 10, 15,20 etc.
This is called Annuity Certain
8/9/2019 Intro to Life Insurance
123/285
As long as the annuitant lives, andthereafter at 50% to the spouse aslong as the spouse lives
8/9/2019 Intro to Life Insurance
124/285
On any of the above terms, but withannuity increasing every year by afixed rate or amount
8/9/2019 Intro to Life Insurance
125/285
Benefits of Annuities
Long Term Savings
Maximize the retirement income
Regular income for the lifetime
Tax benefits
8/9/2019 Intro to Life Insurance
126/285
GRO
UP INSURANCE
8/9/2019 Intro to Life Insurance
127/285
Group Insurance
A large no. of individuals are coveredunder a single policy called the
Master Policy
The contract is between the insurerand a body that represents the group
of individuals, may be employer orthe association
8/9/2019 Intro to Life Insurance
128/285
Since the contract is with the body,that body is the policy holder
The individuals in the group arebeneficiaries
The amount and terms are negotiatedwith the policy holder and not withthe individual beneficiaries
8/9/2019 Intro to Life Insurance
129/285
The premium will be paid to theinsured by the policyholder who mayor may not collect the same from the
individuals concerned
As many persons are covered under a
single contract, the administrativecosts are low
Essential Features of a Group
8/9/2019 Intro to Life Insurance
130/285
Essential Features of a GroupInsurance Scheme
The Group must not have beenformed for the purpose of taking
advantage of the Insurance Scheme.The group must have some otherreasons for bonding
8/9/2019 Intro to Life Insurance
131/285
There must be a minimum no. ofmembers in a group
The individual beneficiary will not beallowed to choose the amount of theinsurance cover. The amount will bedetermined by certain criteria, which
are applied uniformly to all the Groupmembers
8/9/2019 Intro to Life Insurance
132/285
Generally, the individual lives are notseparately assessed for the risks. Theunderwriting or selection is of the
group as a whole.
The terms, amount of cover & thepremium will vary from year to year,
based on the exits, new entrants andthe mortality experience
Types ofGroup Insurance
8/9/2019 Intro to Life Insurance
133/285
yp pSchemes
One year Renewable Group TermInsurance Scheme:
Members are covered for specificamounts, payable on their deathwithin the year
Simplest and cheapest of theschemes
8/9/2019 Intro to Life Insurance
134/285
Group Savings Linked InsuranceSchemes:
Offered to Employers for the benefit
of employees Part of the premium is used for Term
Insurance Cover of the agreedamount
Balance is credited to a Savingsscheme
8/9/2019 Intro to Life Insurance
135/285
Group Gratuity Schemes
Offered to the employers
Related to the Gratuity of theemployees
The scheme guarantees a certainamount of gratuity
Make easier to fund the gratuityliability of the employer
8/9/2019 Intro to Life Insurance
136/285
In Group Gratuity Scheme, the fundsare transferred to the insurer who
have better capabilities for managingthe funds
8/9/2019 Intro to Life Insurance
137/285
Group Superannuation Schemes:
Offered to employers
Related to the payment of pensionsto employees
Help employers in administering thepension funds
Easier administration and availabilityof actuarial and investment expertise
8/9/2019 Intro to Life Insurance
138/285
Reasons for opposition to Group
8/9/2019 Intro to Life Insurance
139/285
pp pInsurance Schemes in India
There is perceptible opposition fromAgents &Development Officersbecause;
The commission rates offered toAgents is low
Development officers are not givencredit for the no. of lives covered under
Group scheme nor the premiumcollected, while calculating Incentives
8/9/2019 Intro to Life Insurance
140/285
SPECIAL PLANS
8/9/2019 Intro to Life Insurance
141/285
Social Security Schemes
Industrial Assurance Plans
Salary Savings Scheme Policies
Riders
Plans Covering handicapped
Key-man Insurance
8/9/2019 Intro to Life Insurance
142/285
Social Security Schemes
Social Security a major concern inall the countries
Most of the social welfare measures
are administered by the Govt
8/9/2019 Intro to Life Insurance
143/285
Govts find it difficult to administerthese schemes
Insurers take over these functions
Social welfare schemes elementarylevel in India
In India, few social security schemesare available for poorer sections
8/9/2019 Intro to Life Insurance
144/285
8/9/2019 Intro to Life Insurance
145/285
Disadvantage High administrativecosts
Agents have to be remunerated
differently Janata Policies Industrial Assurance
plans introduced in India in the earlydays of LIC
In India, Janata policies did notbecome popular
8/9/2019 Intro to Life Insurance
146/285
Salary Savings Scheme (SSS)Policies
Also called Payroll insurance
To cater to the needs of workingclasses
Insurer arranges with the employer to
deduct premium from the salary ofthe workers
8/9/2019 Intro to Life Insurance
147/285
Beneficial for the policyholder: as thepremium is deducted making the premiumpayment easy
Beneficial for the insurer : he is assuredof the premium, less administrative costs
Beneficial for the agent : as the chancesof lapses are less and he gets regular renewalcommission
8/9/2019 Intro to Life Insurance
148/285
Riders:
Clause or condition that is added onto a basic policy providing anadditional benefit
Riders add variety and attractivenessto the nature of the policy
8/9/2019 Intro to Life Insurance
149/285
Riders are added at the choice of theproposer
Riders allow lot of flexibility
Riders enable customization of theproduct
Some of the riders offered by insurers
8/9/2019 Intro to Life Insurance
150/285
in India are;
Increased Death benefit
Accident Disability Benefit Rider: ifthe death is due to accident
Permanent Disability benefits
Premium waiver in child plans in caseof parents death
Dreaded disease or critical illnesscover
8/9/2019 Intro to Life Insurance
151/285
Major Surgical Assistance BenefitRider : Cover to meet major surgical
expenses Cover to continue beyond maturity
age for same or higher SA
Option to increase cover
Option to cover spouse withoutmedical examination
8/9/2019 Intro to Life Insurance
152/285
IRDA Regulations on Riders
The premium on all the riders relatingto health or critical illnesses, in the
case of term or group products shallnot exceed 100% of the premium ofthe mail policy
8/9/2019 Intro to Life Insurance
153/285
The premium on all the other ridersput together should not exceed 30%of the premium on the main policy
The benefits arising under each of theriders shall not exceed the SA under
the basic product
8/9/2019 Intro to Life Insurance
154/285
Plans covering handicapped:
To insure physically handicappedpersons
Extras are charged in some cases
Partially handicapped persons are
mostly accepted without extrapremium
8/9/2019 Intro to Life Insurance
155/285
Key Man Insurance:
Insurance taken by a company on thelife of important employee key man of the company against financialloss that may occur from the
employees premature death
8/9/2019 Intro to Life Insurance
156/285
The Key-man can be;
an Expert
a Technocrat
a Director
a Shareholder
a Executive
8/9/2019 Intro to Life Insurance
157/285
A key man may be defined as anemployee whose death would resultin a financial loss to the company,
including replacement
There can be more than one key man
in a company
8/9/2019 Intro to Life Insurance
158/285
Ad t f K I
8/9/2019 Intro to Life Insurance
159/285
Advantages ofKey-man Insurance
Company is protected against financialloss in the event of key mans death
Gives substantial income tax savings tothe company
An asset for the company in the form ofpremiums paid and added bonus
Generates confidence, sense of securityand loyalty in the minds of key-men
8/9/2019 Intro to Life Insurance
160/285
MODULE IV
INSURANCE OPERATIONS
8/9/2019 Intro to Life Insurance
161/285
INSURANCE ORGANISATION
8/9/2019 Intro to Life Insurance
162/285
INSURANCE ORGANISATION
Marketing
Underwriting
Claims Loss control
Premium auditing
Reinsurance
Actuarial
Investments
Marketing:
f l k l d
8/9/2019 Intro to Life Insurance
163/285
A successful marketing program includes;
Market Research To determine buyersneeds
Advertising & Public relations programs Training programs
Setting production goals and strategies
Effective motivation & management
Underwriting:
8/9/2019 Intro to Life Insurance
164/285
Underwriting:
Underwriting Dept decides;Price
Terms and conditions
Which applicants will be insured
No of applicants
Primary purpose to ensure
profitability Acts as counterbalance to the
marketing dept
8/9/2019 Intro to Life Insurance
165/285
Loss Control:
8/9/2019 Intro to Life Insurance
166/285
Loss Control:
To prevent and minimize losses
Provides necessary information
Assists the Underwriting dept
Actuarial:
8/9/2019 Intro to Life Insurance
167/285
Actuarial:
Performs the mathematical functions
Calculation of rates
Development of rating plans
Estimation of loss reserves
8/9/2019 Intro to Life Insurance
168/285
Objectives of Insurers
8/9/2019 Intro to Life Insurance
169/285
Objectives of Insurers
Earning Profit
Meeting Customer Needs
Complying with legal requirements
Fulfilling humanitarian and societalduties
Measurement of InsurersPerformance
8/9/2019 Intro to Life Insurance
170/285
Profit Measurement:
Financial figures to be considered to measureinsurers profits include;
Reserves
Premiums
Expenses
Losses
Combined Ratios
Investment Income
Operating profit or loss
Reserves
8/9/2019 Intro to Life Insurance
171/285
Reserves
For losses that have already happened butnot paid
Reserves include an amount for IBNR Losses
IBNR Incurred but not reported losses(losses that have already happened, but notyet reported to the insurer)
Premium :
8/9/2019 Intro to Life Insurance
172/285
Premium :
Creates funds for investment
Determines insurers profits
Growth in premiums should be real andshould result from new business
Expenses:
8/9/2019 Intro to Life Insurance
173/285
Expenses:
Expense Ratio : Ratio of expenses topremiums
Expense Ratio varies among variousline of business
Expense ratio varies over time
Also varies among distribution systems
Losses:
8/9/2019 Intro to Life Insurance
174/285
Losses:
Loss Ratio: Ratio of incurred lossesto earned premiums
Earned Premium=(Total Premium/365)*Expired days
8/9/2019 Intro to Life Insurance
175/285
Investment Income:
8/9/2019 Intro to Life Insurance
176/285
Main source of profit for manyinsurers
Most stable source
Operating profit or loss:
8/9/2019 Intro to Life Insurance
177/285
Operating profit or loss:
Sum of Underwriting profit/loss andInvestment profit/loss
Meeting Customer Needs
8/9/2019 Intro to Life Insurance
178/285
Meeting Customer Needs
Evaluation of complaints
No of complaints indicates onecompanys success of failure inrelation to other companies in theindustry
8/9/2019 Intro to Life Insurance
179/285
8/9/2019 Intro to Life Insurance
180/285
State insurance depts. monitor;Sales & Advertising
Underwriting
Ratemaking
Claim settlement
Treatment of insureds
Applicants for insurance
Claimants
Meeting Social Responsibilities
8/9/2019 Intro to Life Insurance
181/285
Meeting Social Responsibilities
No. & type of benefits for itsemployees
Insurers expenditure on loss controlactivities
Contributions to medical, welfare andeducational institutions and
programs
Constraints in achieving theobjectives
8/9/2019 Intro to Life Insurance
182/285
j
Internal Constraints
Efficiency
ExpertiseSize
Financial Resources
Miscellaneous Internal constraints
8/9/2019 Intro to Life Insurance
183/285
External Constraints
Regulation
Public Opinion
Competition
Economic Conditions
Distribution Systems
Miscellaneous External Constraints
8/9/2019 Intro to Life Insurance
184/285
INSURANCE DOCUMENTS
8/9/2019 Intro to Life Insurance
185/285
Proposal Forms
Personal Statements
Premium Receipts
Covernotes Policy Documents
Endorsements
Claim forms
Renewal Notices
Double Insurance
8/9/2019 Intro to Life Insurance
186/285
When more than one policy is takento cover the same risk, it is called
double insurance
Subject matter is insured with two or
more insurers
Coinsurance
8/9/2019 Intro to Life Insurance
187/285
Splitting of risk among multipleparties
It is a way of spreading the risk on
larger insurances between two ormore direct insurers
Coinsurers - Two or more insurers
jointly covering the same risk
8/9/2019 Intro to Life Insurance
188/285
REINSURANCE
REINSURANCE
8/9/2019 Intro to Life Insurance
189/285
A contractual agreement under whichone insurer (Primary Insurer) transfersto another insurer (Reinsurer) some or
all of the loss exposures accepted bythe primary insurer, under insurancecontracts it has issued or will issue infuture
Portion kept by primary insurer Insurers Retention
8/9/2019 Intro to Life Insurance
190/285
8/9/2019 Intro to Life Insurance
191/285
Insurance Vs ReinsuranceInsurance Vs Reinsurance
Insurance Reinsurance
8/9/2019 Intro to Life Insurance
192/285
Contract between an
insurer & a member of
the public
Insurer deals with the
insured
Contract between two
insuring organizations
Reinsurer deals with
the insurer
Functions of Reinsurance
8/9/2019 Intro to Life Insurance
193/285
Stabilization of Loss Experience
Large line capacity
Financing
Catastrophe protection
Underwriting Assistance
Withdrawal from a Territory or Class
of Business
Types of Reinsurance
8/9/2019 Intro to Life Insurance
194/285
Facultative Reinsurance:
Primary insurer negotiates a separate
reinsurance agreement for each risk itwishes to reinsure
Primary insurer is not under obligation to
reinsure a policy it does not wish toreinsure, and reinsurer is not obligated toreinsure policies submitted to it
8/9/2019 Intro to Life Insurance
195/285
8/9/2019 Intro to Life Insurance
196/285
Primary insurers can underwrite, acceptand reinsure such businesses undertreaty without prior consultation withreinsurers
Reinsurer is obligated to accept allbusinesses that falls within the terms ofthe treaty
Prior negotiation is not required
Lower handling expenses
8/9/2019 Intro to Life Insurance
197/285
Factors determining Reinsuranceneeds
8/9/2019 Intro to Life Insurance
198/285
Kinds of insurance written
Exposures subject to catastrophic loss
Volume of insurance written
Available financial resources
Growth plans
8/9/2019 Intro to Life Insurance
199/285
8/9/2019 Intro to Life Insurance
200/285
UNDERWRITING & CLAIMSMANAGEMENT
8/9/2019 Intro to Life Insurance
201/285
8/9/2019 Intro to Life Insurance
202/285
Knowledge of individual riskpeculiarities
Assessing how the risk & a peril
produce potential losses Estimating magnitude of lossesperil-
wise
Estimating insureds systems &capabilities for prevention &minimization of losses
8/9/2019 Intro to Life Insurance
203/285
8/9/2019 Intro to Life Insurance
204/285
Underwriting audit:
Management control tool to check the
implementation of underwriting policy
To reveal whether the existing guidelinescause undesirable results
Classification of Risksin Life Insurance
8/9/2019 Intro to Life Insurance
205/285
Physical Hazards:Age
Gender
Build
Physical condition
Physical impairments
Personal History
Family
History
Increasing extra risk
8/9/2019 Intro to Life Insurance
206/285
Occupational Hazards
Moral Hazards
Claims Management
8/9/2019 Intro to Life Insurance
207/285
To fulfill the insurers obligations to itspolicy holders
Claim : demand that the insurershould redeem the promise made inthe contract
Claims personnel should check;
8/9/2019 Intro to Life Insurance
208/285
Occurrence of the insured event
Obligations under the contract, which should beperformed
Policy status
Persons entitled to demand performance
Objectives of Claims Dept.
8/9/2019 Intro to Life Insurance
209/285
Complying with the contractualpromise
Fair, prompt and equitable service
Achieving insurers profit objectiveOverpaid Claims Reduced profits
Underpaid Claims Decreasedgoodwill
Advantages of Insurance
8/9/2019 Intro to Life Insurance
210/285
Financial security to the family
Potent instrument for savings
Financial independence in old age
Collateral security for housing loan
Acts as emergency fund at times
Income tax benefits
Safe and profitable investment
8/9/2019 Intro to Life Insurance
211/285
Availability of policies of variousdurations (short term to long term)
Policy holder can be free of tensions
Economically and socially backwardsections can be benefited through
Group schemes
Privatization
8/9/2019 Intro to Life Insurance
212/285
After the IRDA Act of 1999, the ins. sectorwas opened for Pvt. companies with aforeign equity of 26%
Insurance sector witnessed substantialgrowth after privatization
If there is increase in FDI from 26% to
49% further entry of players can beexpected
8/9/2019 Intro to Life Insurance
213/285
8/9/2019 Intro to Life Insurance
214/285
International experience
Cutting edge technology
New products Expansion of insurance market
Social security
Developments in IndianInsurance industry
8/9/2019 Intro to Life Insurance
215/285
Entry of private players
Foreign collaboration
New products
New training institutions
New employment generation
Flexibility in products
New marketing channels
8/9/2019 Intro to Life Insurance
216/285
Establishment of InsuranceOmbudsman
New marketing concepts and
strategies Stand alone health insurers
FUTURE OF THE SECTOR
8/9/2019 Intro to Life Insurance
217/285
Indian insurance sector is likely to register agrowth of 200% and a size of Rs. 2000 billion
A private sector insurance business will achieve agrowth rate of 140% as a result of aggressive
marketing technique being adopted by themagainst 35-40% growth rate of state ownedinsurance companies.
In rural markets, the share of private insuranceplayers would increase substantially as these havebeen able to generate a faith among their ruralconsumers
217
India's insurance sector to see 500 per
cent growth by 2010: Study
8/9/2019 Intro to Life Insurance
218/285
India's insurance sector - 500 % growth over the nextthree years - 60 billion-dollar industry by 2010
India's more than one billion people are uninsured, thestudy by the Associated Chambers of Commerce and Industry(Assocham) said.
'A large part of rural India is still untapped due to poordistribution, large distances &high costs relative toreturns, said Assocham president Anil K Agarwal
He said the study had revealed that rural &semi-urbanIndia would contribute 35 billion dollars to the Indianinsurance industry by 2010.
The study added that the urban sector insurance wasestimated to reach 25 billion dollars by 2010, lifeinsurance 15 billion and non- life insurance 10 billiondollars.
218
INSURANCE SECTOR - EMERGINGAREAS
8/9/2019 Intro to Life Insurance
219/285
Demand for Pension Plans
Separateness of Banking and Insurance-Bancassurance
Role of Information Techno-logy
Using Postal Network
Creating Insurance awareness
Innovative Products
219
Private Insurers in India-Growth Prospects and challenges
8/9/2019 Intro to Life Insurance
220/285
8/9/2019 Intro to Life Insurance
221/285
8/9/2019 Intro to Life Insurance
222/285
The total number ofgeneral insurersregistered with IRDA has gone up to
22, with registration of SBI GeneralInsurance Company Limited
8/9/2019 Intro to Life Insurance
223/285
New players have significantlyenhanced product awareness andpromoted consumer education and
information
The strong growth potential of thecountry has also made internationalplayers to look at the Indian insurancemarket
CHALLENGES
8/9/2019 Intro to Life Insurance
224/285
1. Industry Challenges
Commoditization in personal lineproducts
Customer requirementsHeightened competition
Global economic meltdown
8/9/2019 Intro to Life Insurance
225/285
2. Business Challenges
To reduce the turnaround time
To improve their speed to market theirproducts
Distribution Channel pressures
Emerging consumer demands for
mass customization and hybridproducts
8/9/2019 Intro to Life Insurance
226/285
3. Process Challenges
Lack of stream lined processes, changemanagement, automated processes,
central repository
8/9/2019 Intro to Life Insurance
227/285
8/9/2019 Intro to Life Insurance
228/285
Judicious Underwriting
Organizational Solutions: Providing
proper trainings to the employees etc Technology Solutions
Smart Marketing
Aggressive distribution
Insurance industry abroad
8/9/2019 Intro to Life Insurance
229/285
Japan, USA, UK and France are someof the leading countries in the worldinsurance market
At the global level, life insurancemarket has been bigger and growingfaster, compared to non life business
8/9/2019 Intro to Life Insurance
230/285
Regulations vary between thecountries
The UK, Chile, Hong Kong andNetherlands generally rely more onmarket forces
Germany, Japan, Korea, Switzerlandand majority of the developing
countries have historically practisedintensive regulation
8/9/2019 Intro to Life Insurance
231/285
As in the USA, regulation of theCanadian insurance market is sharedby the provincial governments andthe federal govt.
After the passage of North AmericanFree Trade Agreement (NAFTA),foreign investment was allowed in theinsurance industry in Mexico since1990. CNSF-Supervisory authority
8/9/2019 Intro to Life Insurance
232/285
Dept of Trade and Industry isresponsible for regulating the UKinsurance market
Japan dominates Asian insurancemarket.
Automobile insurance dominatesJapans non life insurance market
8/9/2019 Intro to Life Insurance
233/285
South Korea has also been growingsubstantially
The insurance market in South Korea isregulated by the Finance and Economic
Bureau and the Insurance SupervisoryBoard
Chinas premier national insurer is thePeoples Insurance Company of China
The African continent represents a minutepercentage of the worlds insurance market
Life insurance companies in India
8/9/2019 Intro to Life Insurance
234/285
Bajaj Allianz Life Insurance Company
Limited
Birla Sun Life Insurance Co. Ltd
HDFC Standard Life Insurance Co. Ltd
ICICI Prudential Life Insurance Co. Ltd
ING Vysya Life Insurance Company Ltd.
Life Insurance Corporation of India
8/9/2019 Intro to Life Insurance
235/285
Max New York Life Insurance Co. Ltd Met Life India Insurance Company Ltd.
KotakMahindra OldMutual Life Insurance
Limited
SBI Life Insurance Co. Ltd
Tata AIG Life Insurance Company Limited
Reliance Life Insurance Company Limited.
Aviva Life Insurance Company India Limited
Sahara India Life Insurance Co, Ltd.
Sh i if C d
8/9/2019 Intro to Life Insurance
236/285
Shriram Life Insurance Co, Ltd. Bharti AXA Life Insurance Company Ltd
Future Generali India Life Insurance CompanyLimited
IDBI Fortis Life Insurance Company Ltd., Canara HSBC Oriental Bank of Commerce Life
Insurance Company Ltd.
AEGON Religare Life Insurance CompanyLimited.
DLF Pramerica Life Insurance Co. Ltd.
Star Union Dai-ichi Life Insurance Co. Ltd.,
IndiaFirst Life Insurance Company Limited
8/9/2019 Intro to Life Insurance
237/285
R li G l I C L d
8/9/2019 Intro to Life Insurance
238/285
Reliance General Insurance Co. Ltd. Royal Sundaram Alliance Insurance Co. Ltd
Tata AIG General Insurance Co. Ltd.
United India Insurance Co. Ltd Cholamandalam MS General Insurance Co.
Ltd.
HDFC ERGO General Insurance Co. Ltd
Export Credit Guarantee Corporation of India
Ltd.
A i l I C f I di L d
8/9/2019 Intro to Life Insurance
239/285
Agriculture Insurance Co. of India Ltd.
Star Health and Allied Insurance Company
Limited
ApolloMunich Health Insurance CompanyLimited
Future Generali India Insurance Company
Limited Universal Sompo General Insurance Co.
Ltd.
Sh i G l I C
8/9/2019 Intro to Life Insurance
240/285
Shriram General Insurance Company
Limited,
Bharti AXA General Insurance Company
Limited Raheja QBE General Insurance Company
Limited,
SBI General Insurance Co. Ltd.
8/9/2019 Intro to Life Insurance
241/285
C tl 23 lif i i th
8/9/2019 Intro to Life Insurance
242/285
Currently 23 life insurers in thecountry
Share of LIC raising to 66%
Total life business growing by 22% Launching new products
Aviva Life launched 9 new ULIP products
Contributed to 4.1% of GDP 22 general insurance companies
Scope of the Indian InsuranceMarket
E t d t h 80 100% b 2012
8/9/2019 Intro to Life Insurance
243/285
Expected to reach 80-100% by 2012 Premium to increase between 5.1%
and 6.2% by 2012
Demand for pension plans increasing113 million Indians expected to be over
60 by 2016 and over 179 by 2026
Government planning to raise the FDI
cap to 49%
Innovative Marketing Techniques
O li h lth i b T t AIG
8/9/2019 Intro to Life Insurance
244/285
Online health quiz by Tata AIG The customers can take the interactive quiz and
the data will be stored in the database which willact as leads for the company
Starting of newsletters which are send tothe customers which will create morerapport with them
Volunteering and Supporting in local
society Innovative product development
Ente ing in local net o king e ents like
8/9/2019 Intro to Life Insurance
245/285
Entering in local networking events likethose conducted by CII etc.
Conducting seminars and distribution ofbusiness cards and newsletters Providing
emergency info wallet card
Automated voice message calls whichcan include customer appreciation message,renewal info etc.
8/9/2019 Intro to Life Insurance
246/285
Send Marketing Materials with every
8/9/2019 Intro to Life Insurance
247/285
Send Marketing Materials with everycustomer communication
Handwritten Letters for best customers
Annual policy reviews
Selecting an internet marketingspecialist
Highway advertisement
8/9/2019 Intro to Life Insurance
248/285
Highway advertisement
Advertising through eco friendliness
8/9/2019 Intro to Life Insurance
249/285
CREDIT INSURANCE
What is Credit Insurance
Credit insurance covers businesses and an
8/9/2019 Intro to Life Insurance
250/285
Credit insurance covers businesses and an
individuals family members against losses
resulting from the inability to repay a loan. A
credit insurance policy usually provides
security cover for a specific reason for which a
borrower defaults.
TYPES OF CREDIT INSURANCE
Trade Credit Insurance
8/9/2019 Intro to Life Insurance
251/285
Trade Credit Insurance
For business entities
Both domestic & export business.
Credit Life Insurance
For individuals
To ensure family doesnt suffer
WHY NEED CREDIT INSURANCE
8/9/2019 Intro to Life Insurance
252/285
For Businesses;
Improved Financing Terms.
Credit Terms.
Cash Flow Problems.
Balance sheet protection.
Enter new markets safely.
For Individuals
8/9/2019 Intro to Life Insurance
253/285
For IndividualsFrees family from the responsibility of paying
your debt.
Reduces your monthly costs.
Provides you and your family with peace of
mind.
Protects you from using or losing your savings.
CREDIT INSURANCE IN INDIA
Rs 450 Cr Business
8/9/2019 Intro to Life Insurance
254/285
Rs 450 Cr Business
Expects to rise to Rs 600 Cr by 2010.
Still in its nascent stage.
Premium ranges from 0.35% to 1% of sum insured.
Main Player ECGC
Other players are also there like Bajaj Allianz, TATA
AIG, ICICI Lombard, IFFCO TOKIO & New India
Assurance.
8/9/2019 Intro to Life Insurance
255/285
E-learning
8/9/2019 Intro to Life Insurance
256/285
E-LEARNING IN INSURANCESECTOR
Participants
8/9/2019 Intro to Life Insurance
257/285
Participants
1)Customers
2)Agents
3)IRDA4)Insurance company
5)sales officers
ADVANTAGES OF E-LEARNING
For the trainer or insurance provider
8/9/2019 Intro to Life Insurance
258/285
For the trainer or insurance provider
Reduced overall cost
Learning times reduced
Increased retention Consistent delivery
Expert knowledge
Proof of completion and certification
Advantages for the Learner
8/9/2019 Intro to Life Insurance
259/285
On-demand availability
Self-pacing
Interactivity Confidence
8/9/2019 Intro to Life Insurance
260/285
8/9/2019 Intro to Life Insurance
261/285
Micro insurance in India
Micro-insurance is protection of poor
8/9/2019 Intro to Life Insurance
262/285
Micro insurance is protection of poorpeople and their families against specificperils like death, illness, weathercatastrophes, etc. In principle, micro-
insurance works like any typical insurancebusiness.
But there are several things thatdifferentiate it from normal insurance.
8/9/2019 Intro to Life Insurance
263/285
Micro Insurance Models
8/9/2019 Intro to Life Insurance
264/285
Partnership model
Agency model
Micro-agent model
8/9/2019 Intro to Life Insurance
265/285
Agency model
In this model the insurer uses its normal
8/9/2019 Intro to Life Insurance
266/285
In this model the insurer uses its normalagency office and sells microinsuranceproducts directly. The client comes to theagency office for sales and servicing of the
product.
Micro-agent model
It is the invention of Tata-AIG
8/9/2019 Intro to Life Insurance
267/285
It is the invention of Tata AIG The central building blocks of the model
are Rural Community Insurance Groups(CRIGs) supervised by rural organizations
such as churches, NGOs or MFIs.
The leader of the CRIG is licensed as anagent.
This practice reduces training costs.
Distribution Channels
Agents
8/9/2019 Intro to Life Insurance
268/285
Agents Formal Banks
Regional Rural Banks
Cooperative Bank
NGOs &MFIs
Post Office
Challenges in Micro Insurance
Penetration
Designing of products suiting the rural
8/9/2019 Intro to Life Insurance
269/285
Designing of products suiting the ruralmarket.
Using the right distribution channel mixto reach the potential customer at an
affordable cost.
Intermediaries being able to buildpersonal credibility with the clients.
Lack of products
8/9/2019 Intro to Life Insurance
270/285
Social Insurance
8/9/2019 Intro to Life Insurance
271/285
Characteristics
Based on law, and not on contract. Cost andbenefits set by the govt
8/9/2019 Intro to Life Insurance
272/285
,benefits set by the govt. Coverage is compulsory. Benefits cant be
chosen Objective is to provide some min level of
economic security and stress on freeenterprise and individual initiative
Focus on providing max benefits to the LIG Assures an interruption of income does not
happen in the case of death orunemployment
Social Insurance in India
UNICEF and World Bank provide
8/9/2019 Intro to Life Insurance
273/285
UNICEF and World Bank provideevidence that direct public support willlead to success of social securityprograms
Countries with primary social securitybecame rich. Eg: China, Cuba,Jamaica, Kuwait etc.
Need for SI in India
Large percentage employed in the
8/9/2019 Intro to Life Insurance
274/285
Large percentage employed in theunorganized sector
State support negligible
Social changes in the country
A comprehensive social security
8/9/2019 Intro to Life Insurance
275/285
A comprehensive social securitysystem includes social insurance,health insurance, disabilitycompensation, unemploymentcompensation, old-age pensionschemes, etc.
SI Schemes of GIC
Krishi Bima Yojana, Personal Accident
8/9/2019 Intro to Life Insurance
276/285
a oja a, o a dsocial security scheme, hut insurancescheme etc.
Most of them are failures due toincompatibility with the objectives.
SI Schemes of LIC
Landless Agricultural Laborers Scheme
8/9/2019 Intro to Life Insurance
277/285
Landless Agricultural Laborers Scheme,Group Insurance Schemes, KrishiShramik Samajik Suraksha Yojana etc.
Most of them failed due to lack ofawareness among people
Another scheme launched was JanashreeBima Yojana to replace older schemes
Objective was to provide LI to rural andurban poor
8/9/2019 Intro to Life Insurance
278/285
Shopassurance
8/9/2019 Intro to Life Insurance
279/285
8/9/2019 Intro to Life Insurance
280/285
Pantaloons, WestSide, Big Baazar,
8/9/2019 Intro to Life Insurance
281/285
, , g ,FoodWorld, Reliance Fresh, ShoppersStop, Spencers and Subhiksha havebuilt strong reputations on theshopassurance front.
Wal-Mart has been selling life andmortgage insurance in addition to
motor, travel and home insurance,through its stores worldwide.
Kishore Biyani's Future group, whichowns Pantaloons and Big Baazar is a
8/9/2019 Intro to Life Insurance
282/285
y g p,owns Pantaloons and Big Baazar, is astakeholder in Future Generali IndiaLife Insurance Company and FutureGenerali India Insurance Company
Ambani's Reliance Fresh is into lifeand non-life insurance
ITC has an insurance brokeringventure called ITC Choupal
ICICI Lombard has already entered
8/9/2019 Intro to Life Insurance
283/285
ICICI Lombard has already enteredinto an agreement with RelianceRetail
MetLife Insurance has tied up withMumbai's Apna Bazar co-operativestores
BenefitsFrom the view point of Insurer:-
Increase the volume of business.
8/9/2019 Intro to Life Insurance
284/285
Solve problems of price competetion &compensation need of agents.
Cover huge middle-class incomeholders.
Cost cutting leading to low premium.
Risk coverage through productdiversification.
BenefitsFrom the view point of Customer:-
Product innovation & distribution t ti f ti
8/9/2019 Intro to Life Insurance
285/285
customer satisfaction.
Low cost premium.
Easy accessibility of insuranceproducts.
l f i i h i i